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Abstract

In this work, we tried to test two hypotheses for the Brazilian municipalities on the relationship between the aging of the population an educational expenditures. The first is that the increase of the elderly share reduces the educational expenditure, according to consensus of the recent empirical literature. The second is that we should observe intergenerational altruism if there is a co-residence relationship among elderly and youths. Thus, a greater share of elderly and youth living together should increase the expenditure in education. This last hypothesis is the new element that we tried to introduce in the literature. To test the hypotheses of this work we use panel data from 1991 and 2000 Population Census (Brazilian Institute of Geography and Statistics) and from Finbra (National Treasury Office). We considered the endogeneity possibility due to the Tiebout mechanism for individual’s location. To deal with this problem we used the Fixed Effects method with instrumental variables. The econometric results indicated that an increase in the share of elderly reduces the educational expenditure per youth, which supports the results of the main studies of the literature. Besides, the results also support the existence of intergenerational altruism in Brazil because as an increase in the share of elderly co-residing with youth raises the educational expenditure. Therefore, the results confirm the hypotheses of the paper and also reveal the importance of elderly family arrangements in determining the educational expenditure.